Ec 4325: The Economic Development of Japan Fall 2003 (TR 9:10-10:25 AM) Office Hours: Thursday 2-4 Office Hours: Tuesday 1-3 and by appointment

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1 Ec 4325: The Economic Development of Japan Fall 2003 (TR 9:10-10:25 AM) Professor David Weinstein TA: Kazuko Shirono Tel: Tel: Office: IAB 916 Office: IAB 220 (ISERP) Office Hours: Thursday 2-4 Office Hours: Tuesday 1-3 and by appointment Course Outline and Assigned Readings This course covers Japan s economic organization, structure and performance from the midnineteenth century to the present, focusing on the postwar period. Special emphasis is placed on the character of Japanese economic policy making as well as on the behavior of Japanese enterprises, financial institutions, labor force and households. In addition, there is considerable discussion of Japan s recent economic conditions. Class notes: Class notes, handouts, previous exams, and important announcements will be posted on my webpage: Students should check this web page frequently. Class notes should be downloaded and printed the day before class. I will not bring extra copies to class. Class notes do not cover my lectures completely and should not be viewed as a substitute for regular class attendance. Requirements: Midterm Exam: 20% Paper: 40% ( words) Final Exam: 30% Class Participation 10%

2 Explanation of Requirements 1. Students who have not had a two semester principals of economics course should not take this course. Ideally students will have had four semesters of principals. 2. Regular class attendance and regular participation in class discussion 3. Midterm Exam. A midterm exam consisting of short-answer questions based on the readings and lectures will be given on October An analytical paper about the Japanese economy. Due date: December 4 at 9:10 AM (at the beginning of class). Ideally your paper will ask a question relevant to understanding an aspect of the Japanese economy that we have not covered in class. The paper should then seek to answer the question. Previous successful topics include, what factors explain changes in female labor force participation, were firms with main banks particularly successful during the 1980 s, etc. You should make an effort to use some primary source material such as the Japan Statistical Yearbook, the Yearbook of Labor Statistics, or National Accounts data. Try to avoid writing a paper that simply describes an industry or a firm. Description may be necessary to answer the question, but it should not be the point of the paper. The paper should be typewritten, double-spaced, about 15 pages (maximum 3500 words), plus tables/exhibits (with your sources indicated), footnotes, and bibliography of sources used. If you strongly desire to do a different kind of paper, consult with me. Unpleasant Issues: The paper must contain references and footnotes; all quotations must be encapsulated in quotation marks and properly referenced. I strongly urge you to read the MLA Handbook for Writers of Research Papers or similar style guide s section on plagiarism and proper citation before writing. Students who plagiarize in this course will fail and may face disciplinary action by the University. Papers arriving after the start of class will receive a penalty of one grade off, with an additional grade off for each day late. These will cumulate until you receive the minimum of either my evaluation of your paper or a C-. 5. Final Exam. 2

3 Readings All Students should purchase Hoshi, Takeo and Kashyap, Anil (2001) Corporate Financing and Governance in Japan, Cambridge: The MIT Press. International Economics. EC 4325 Course Pack - articles bound in the course pack. The course pack is available at the Village Copier (Broadway between 111 th and 112 th Streets.) In addition, all readings are on reserve at Lehman Library. Other References and Sources The three most comprehensive books on the Japanese postwar economy prior to the publication of The Japanese Economy are: Yamamura, Kozo and Yasukichi Yasuba, editors, The Domestic Transformation, Volume 1 of The Political Economy of Japan under the general editorship of Yasusuke Murakami and Hugh T. Patrick (Stanford, CA: Stanford University Press, 1987). Nakamura, Takafusa, The Postwar Japanese Economy -- Its Development and Structure (Tokyo: University of Tokyo Press, 1981). Patrick, Hugh and Henry Rosovsky, editors, Asia's New Giant -- How the Japanese Economy Works (Washington, DC: Brookings Institution, 1976). Japanese Economic Studies is a useful quarterly journal of translations of contemporary Japanese scholarship on economy and management, including occasional industry studies. A useful newspaper is The Nikkei Weekly, the English-language version of Japan's excellent economics daily newspaper. The Japan Economic Institute (Washington) also provides weekly news summaries and useful, concise descriptions and studies on current topics. The Economist Intelligence Unit publishes a Country Report on Japan (Quarterly) and a Country Profile for Japan (Annual) that are useful up-to-date references. The Journal of the Japanese and International Economies is an excellent, more analytically advanced source of original articles, some of which have been used in NBER conferences. Pacific Economic Papers series, published by the Australia-Japan Research Centre of the Australian National University, contains papers on a number of interesting and relevant topics. A great websites for finding statistical information or links to it are 3

4 September 2: (Class 1) Introduction and Overview September 4: (Class 2) Japanese Economic History to 1850 Oishi, Shinzaburo. (1991) The Bakuhan System in Nakane, Chie and Shinzaburo Oishi eds., Totman, Conrad trans., Tokugawa Japan: The Social and Economic Antecedents of Modern Japan. pp September 9: (Class 3) The Opening of Japan Rosovsky, Henry. Japan s Transition to Modern Economic Growth. in Industrialization in Two Systems: Essays in Honor of Alexander Gerschenkron. Ed. Henry Rosovsky September 11: (Class 4) Prewar Industrial Policy Francks, Penelope, Japanese Economic Development: Theory and Practice (London: Routledge, 1992), pp September 14 7PM: (Class 5) Prewar Banking and Finance Hoshi and Kashyap, Chapter 2 September 16: (Class 6) The Rise of Concentration Francks, Penelope, Japanese Economic Development: Theory and Practice (London: Routledge, 1992), pp September 18: No Class September 23: (Class 7) Zaibatsu Francks, Penelope, Japanese Economic Development: Theory and Practice (London: Routledge, 1992), pp September 25: (Class 8) Prewar Labor Markets September 30: (Class 9) The Wartime Japanese Economy Hoshi and Kashyap, Chapter 3 4

5 October 2: (Class 10) Japanese Economic Growth Baumol, William, Sue Ann Batey Blackman, and Edward N. Wolff, International Convergence: The Comparative US Productivity Lag, in Productivity and American Leadership: The Long View, Cambridge: MIT Press, pp October 7: (Class 11) Japanese Labor Practices I: Theory Koike, Kazuo (1994) Intellectual Skills and Long-Term Competition, in Imai, Kenichi and Ryutaro Komiya eds. Business Enterprise in Japan, Cambridge: MIT Press. October 9: (Class 12) Japanese Labor Practices II: Empirics Hashimoto, Masanori and John Raisian. Employment, Tenure and Earnings Profiles in Japan and the United States. American Economic Review 75 (1985): October 14: (Class 13) Recent Development in Japanese Labor Markets Kato, Takao The End of Lifetime Employment in Japan? Evidence from National Surveys and Field Research, Center for Japanese Economy and Business Working Paper # 185 October 16: (Class 14) Zaibatsu Dissolution and the Formation of the Main Bank System Hoshi and Kashyap, Chapter 4 October 21: (Class 15) The Economics of the Main Bank System Hoshi and Kashyap, Chapter 5 ******** October 23: (Class 16) Midterm ******* October 28: (Class 17) Savings and the Cost of Capital October 30: (Class 18) Vertical Groups and Buyer-Supplier Relationships Weinstein, David (1997) Foreign Direct Investment and Keiretsu: Rethinking US and Japanese Policy, in Feenstra, Robert ed. The Effects of US Trade Protection and Promotion Policies, Chicago: University of Chicago Press. 5

6 November 6: (Class 19) Formal Industrial Policy Beason, Richard and David Weinstein, Growth, Economies of Scale, and Targeting in Japan ( ), Review of Economics and Statistics, November 11: (Class 20) Informal Industrial Policy Yamamura, Kozo and Jan Vandenberg, "Japan's Rapid Growth Policy on Trial: The Television Case" in Saxonhouse, Gary and Kozo Yamamura eds. Law and Trade Issues of the Japanese Economy University of Washington Press, Seattle. pp November 13: (Class 21) The Bubble Economy Hoshi and Kashyap, Chapter 7 November 18: (Class 22) The Bursting of the Bubble International Economics, pp November 20: (Class 23) Fiscal Policy International Economics, pp November 25: (Class 24) Monetary Policy Krugman, Paul Japan s Trap November 27: Thanksgiving No Class 6

7 December 2: (Class 25) Banking Policy Hoshi and Kashyap Chapter 8. December 4: (Class 26) The Big Bang and Beyond Hoshi and Kashyap Chapter 9. International Economics, pp